Unfortunately, the European Union bureaucrats declared
the end of the energy crisis as if it were the result of decisive policy
action, but the reality is that the energy problem in the EU was only
diminished by purely external factors: a very mild winter and the decline in
global commodity prices due to the central bank rate hikes. Thus, the energy
crisis remains, and the problems of security of supply and affordability of the
system persist.
The European Union’s dependency on Russian gas has not been
solved; it has only been disguised by a massive increase in dependency on coal
(lignite) in the case of Germany and expensive liquefied natural gas imported
from the rest of the world.
At the end of 2022, Germany’s energy mix was the clearest
example of its energy policy failure. Hard coal and lignite accounted for
31.2%, natural gas 13.8%, and mineral oil 0.8%, with nuclear at 6.0%. After
almost 200 billion euros in renewable subsidies, Germany needs more coal and
imported natural gas.
What did the government decide after facing the mistake of
shutting down almost all its nuclear fleet? Double down and continue with the
process of closing the remaining ones. No wonder Germany is in recession. Its
industrial model requires abundant and affordable energy, and the different
governments have made the cost of energy uncompetitive.
Same is the problem with Spain, the government decided to
implement an “Iberian exception” that eliminates the cost of gas from the
wholesale power price only to charge it back to consumers as a surcharge in the
bill. The result is Spain has the fifth highest electricity bill in Europe,
which sent hundreds of millions of euros to France and Portugal that purchased
the subsidized energy while the Spanish consumer paid the bill to natural gas
producers, and its imports of Russian liquefied natural gas (LNG) soared, but
the government tried to convince citizens that LNG from Novatek is not Russian
gas because it is not a pipeline Gazprom supply, even when the supplier is a
leading Russian energy multinational.
Even worse, the consumers have not seen the improvement in
commodities in their bills. If we look at the latest reported Eurostat figures
of household electricity prices, these increased in all but two EU Member
States in the second half of 2022, compared with the second half of 2021, just
as commodities slumped in international markets.
The average for the EU stands at 252 euros per MWh and 261
euros per MWh for the euro area. This is 20% to 30% higher than the average
residential electricity rate in the United States, according to data from
Energy Sage.
The European energy crisis was not solved. It was disguised
thanks to a mild winter and the slowdown in coal and gas imports from China.
European governments continue to place all their bets on a misguided energy
transition that ignores security of supply and competitiveness and will make
the EU depend on China for rare earths and metals as well as the US and OPEC
for commodities.
The European Union should have abandoned ideological
decisions and allowed technology, competition, and industry to provide the
optimal solution that delivers a competitive and secure supply of energy.
Deciding to forbid the development of domestic resources and
focus on intermittent and volatile sources of energy before the battery
technology is fully operational is an enormous mistake that condemns the
European Union to suffer higher costs and lower growth. Environmental policies
must be considered from a global perspective.
The EU accounts for less than 10% of global emissions but
almost 100% of the cost. It needs to focus on competitiveness, security of
supply, and respect for the environment from an industrial perspective.
Ignoring the importance of making the most of nuclear, hydroelectric, gas, and
all other available sources is dangerous.
In China or the United States, affordability, security of
supply, and competitiveness are the drivers of energy policy.
In Europe, it is a misguided view of “not in my backyard”
that is making the continent more dependent on others, not less. Subsidies are
delaying the necessary development of intermittent and volatile energy sources
because policymakers reject the importance of creative destruction and
competition as driving forces of progress. Interventionism is not delivering
better or cheaper energy; it is making the European Union lose in the
technology and energy security race.
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